If the interest rate is 7%, $500 received at the end of 9 years is worth how much today? A)500/(0.07)⁹. B)500/(1 + .07)⁹. C)500/(1 + 7)⁹. D)500.

Question

Quizplus · Accepted Answer

We can use the formula for present value of a future cash flow:
PV = FV/(1+r)^n
Where PV is the present value, FV is the future value, r is the interest rate, and n is the number of years.

Substituting the given values, we get:
PV = 500/(1+0.07)^9
PV = 500/1.96715
PV = 254.40

So, the present value of $500 received at the end of 9 years with an interest rate of 7% is $254.40. Choice B is the correct answer.

If the Interest Rate Is 7%, $500 Received at the End